USD/INR Forecast: Continues to See Noisy Behavior Just Above 50-Day EMA

• The USD/INR initially tried to rally during the trading session on Thursday but gave up some of its gains against the Indian rupee.
• This is not a huge surprise, because we are so close to the major ceiling in the market which is near the 83 Rupee level.
• The 83 Rupee level has been an area that the Reserve Bank of India seems to be defending.
• After all, they have jumped in and shorted the US dollar multiple times, as it looks like they are trying to put a bit of a ceiling in the market at that ₹83 levels.

That being said, the 50-Day EMA sits just underneath, and therefore it looks as if it is going to offer a little bit of support, but we have a trendline underneath there as well that is rather important. As long as we stay above that trendline, I do believe that eventually, the US dollar swallows the Indian rupee, but in the short term I anticipate that we would see a lot of volatility, so therefore I think short-term tips might end up being buying opportunities. While I’m not a huge fan of trying to fight a central bank, the reality is that the US dollar continues to be so strong that sooner or later the Indian central bankers are going to lose.

It's All About the Dollar

That being said, if we broke down below the ₹81 level, then it will be obvious that they got their wish, and the US dollar would fall from there. In that general vicinity, I would anticipate intercepting the 200-Day EMA, and possibly going down to the ₹79 level underneath. This would more likely than not see the US dollar falling in general, so with that being the case you need to keep in mind that the overall weight of the US dollar in the Forex markets while away from anything that the Indians can do long term.

 If the US dollar takes off in strength, eventually they will have to acquiesce. On the other hand, if the US dollar starts to fall rather rapidly against most other currencies, then that will help them, and we could go much lower. The smaller currencies do tend to be a little bit different than major currencies, but at the end of the day, it’s all about the dollar.